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Chan alleges Katz broke Manitoba's Municipal Council Conflict of Interest Act in 2010 by spending $2,915 of public funds on a Christmas party at Hu's Asian Bistro, an Ellice Avenue restaurant the mayor owned at the time. On April 2, a court will consider whether the taxpayer-funded party violated municipal conflict-of-interest legislation.

If a judge decides Katz has violated provincial rules, he will lose his seat.

Chan would not disclose the details of the offer, but said he is not interested in settling the matter before it is heard in court.

"I really want to see the politicians be responsible for their decisions and their actions," he said Sunday. "We're not going to back down."

The mayor's office declined to comment and directed calls to Tapper.

Tapper said he and his client did not offer Chan financial settlement of any kind, and Chan has violated court rules that prohibit discussing settlement offers publicly.

"He is clearly in violation of that," Tapper said Sunday. "I'm appalled by what he has said."

Tapper said he plans to file a court motion seeking sanctions against Chan early this week. He said he will ask the court for appropriate penalties, which may include dismissing Chan's application.

Tapper called Chan's actions "outrageous" and said he has never heard of a similar situation occurring in his years of practice.

"It's grotesque," he said.

Earlier this year, Chan filed a declaration in the Court of Queen's Bench alleging Katz engaged in a conflict of interest. After making procedural errors, Chan, who manages the Cathay House Restaurant and has worked for Daniel McIntyre Coun. Harvey Smith, withdrew his motion and was forced to pay $750 in court costs.

The complaint was then picked up by human rights lawyer David Matas, who filed another declaration and secured the April court date.

Chan said he thinks the recent court case involving Toronto Mayor Rob Ford may have prompted Katz's lawyers to offer a settlement.

Recently, a judge ordered Ford to leave office after deciding he violated Ontario's Municipal Conflict of Interest Act. Toronto resident Paul Magder launched the complaint after the mayor failed to recuse himself from a Toronto city council vote over whether he had to repay $3,150 in improper donations to his football charity.

A judge ruled Ford may remain in office until he appeals the decision at a court hearing in January, according to Toronto media reports.